How Life Insurance Raises Premiums and What to Do about It
Sometimes there can be cases where life insurance companies are losing their net worth, their business or facing insolvency issues, where they are facing a pile of debt. Such companies may not want to file for bankruptcy and instead want to cut down costs and slash money from different liabilities, basically getting rid of some of their policies. The company would need some policy holders to cancel their insurance, but instead they would find a loop hole and raise life insurance premiums on some customer’s universal life insurance policies.
By doing this, the cash value of the insurance would be reached faster and it would be void. If this happens, policy holders have to pay lots more premium. They do these with the hopes that the policy holders walk away with the paid premiums or cancel the policy and thus, insurance liability would disappear too. Sometimes, the company can get greedy and triple the life insurance.
Luckily, insurance companies are not allowed to jack up premium prices whenever they desire. The state insurance commissioner must approve increased rates and even if they do approve, policy holders have the right to sue companies for raising the premiums. Insurance is one of the best financial assets an individual can have. It is best to avoid buying whole life insurance because it is a more profitable option to the insurance company rather than you.
How do I avoid this problem?
The best solution to work around this plan is buying term life insurance. Companies are not allowed to increase rates during the term of your policy, which means you will be paying fixed premiums if you have a 30-year term policy. If you become victim to the insurance agent’s whole or universal life insurance plan schemes, you are likely to be exposed to this kind of situation. Companies cannot force you to buy the plan which they state and you are allowed to complain against them to the insurance commissioner should they do so. In the worst case scenario, you can cancel your insurance policy and file a lawsuit against them and this is one of the most easily winnable cases in a court of law.
However it is important to note that if your health is deteriorating, poor health would prevent you from qualifying for a new policy and you may be better off keeping the current policy you have. If the insured period needs to be extended, most term policies include a renewal option and allow the individual to renew for a maximum guarantee rate. Renewal may or may not be guaranteed and the insured should review their contract to see if evidence of insurability is required to renew the policy. The point is, term life insurance is a very frugal method to keep your commitments and provide for your family in case you die.